10Y dollar S&P 500

Dollar Doldrums Continue Into Monday Evening As Reflation Trade Unwind Rolls On

Well, Monday ended the same way Monday began. For the early risers who catch the Heisenberg daily kickstart (which honestly is the most important post of the day during the week), you'll note that it was all about the dollar. The reflation trade had, well, deflated in the overnight session as the world reacted to Trump's inauguration speech (which I'm sick to death of hearing about). The speech marked the second time in a week that Trump inadvertently verbally intervened in FX markets (the first being his comments to the Wall Street Journal). I've contended that jawboning (either intentional or accidental) poses a real risk in terms of FX vol going forward. Both Trump and members of his inner circle have variously demonstrated their willingness to talk down the "too strong" greenback and sure enough, the following headlines crossed at around 4:40 this afternoon: “From time to time, an excessively strong dollar may have negative short term implications on the economy,” says U.S. Treasury Secretary nominee Steven Mnuchin in written answers to questions from senators. “The strength of the dollar has historically been tied to the strength of the U.S. economy and the fait
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